“Today we reported financially strong third quarter results with record
subscription and support revenue and gross margins, as well as record
high EPS and deferred revenue,” stated David Flynn, President and Chief
Executive Officer. “These results demonstrate our progress moving to a
SaaS-like business model and underscore our focus on profitability. We
are pleased to return to growth in the second half, and while we are not
yet seeing the growth levels that we aspire to, we are encouraged that
our improved product offerings are bringing us into more large
opportunities, suggesting progress toward our long-term goals.”

Financial Summary

Total revenue for the third quarter of fiscal year 2018 was $40.6
million, compared with $39.3 million for the third quarter of 2017.
Subscription and support revenue was $11.7 million, or 29% of total
revenue, for the third quarter of fiscal year 2018, compared with $10.1
million, or 26% of total revenue, for the third quarter of 2017.

On a GAAP basis, net loss was $2.4 million for the third quarter of
fiscal year 2018, compared with a net loss of $5.1 million for the third
quarter of 2017. GAAP gross margin was 65.6% for the third quarter of
fiscal year 2018, compared with 66.6% for the third quarter of 2017.

On a non-GAAP basis, net income was $1.5 million for the third quarter
of fiscal year 2018, compared with a net loss of $0.1 million for the
third quarter of 2017. Non-GAAP gross margin was 66.1% for the third
quarter of fiscal year 2018, compared with 67.5% for the third quarter
of 2017.

New Accounting Standard

The Company adopted, effective January 1, 2018, ASC 606, the new
accounting standard related to revenue recognition. The Company has
adjusted prior-period information to reflect the adoption of this new
standard.

Conference Call Information

Aerohive Networks will host a conference call and webcast for analysts
and investors to discuss its third quarter 2018 results and outlook for
its fourth quarter of fiscal year 2018 at 2:00 pm Pacific Time today,
October 31, 2018. The call may be accessed by dialing 323-794-2093 and
providing the passcode 4522956. A live and archived audio webcast of the
conference call will be accessible from the “Investor Relations” section
of the Company’s website at http://ir.aerohive.com.

Safe Harbor Statement

This press release contains forward-looking statements, including
statements regarding Aerohive Networks’ financial expectations and
operating performance and expectations for continued momentum, including
statements regarding the progress we are making to address challenges in
our business, including sales execution issues, our ability to deliver
innovative solutions as a full-stack cloud networking company, and our
ability to strengthen our financial position. These forward-looking
statements are based on current expectations and are subject to inherent
uncertainties, risks and changes in circumstances that are difficult or
impossible to predict. The actual outcomes and results may differ
materially from those contemplated by these forward-looking statements
as a result of these uncertainties, risk and changes in circumstances,
including, but not limited to, risks and uncertainties related to: our
ability to continue to attract, integrate, retain and train skilled
personnel, especially skilled R&D and sales personnel, in general and in
specific regions, our ability to develop and expand our revenue
opportunities and sales capacity and improve the effectiveness of our
channel, our ability to resolve challenges related to sales execution
and improve our operating and sales execution, general demand for
wireless networking in the industry verticals we target or demand for
Aerohive® products in particular, our ability to benefit from our
participation in the E-Rate program, unpredictable and changing market
conditions, risks associated with the deployment, performance and
adoption of our new products and services, risks associated with our
growth, competitive pressures from existing and new companies, including
pricing pressures, changes in the mix and selling prices of Aerohive
products, technological change, product development delays, reliance on
third parties to manufacture, warehouse and timely deliver Aerohive
products, our inability to protect Aerohive intellectual property or to
predict or limit exposure to third-party claims relating to its or
Aerohive’s intellectual property, Aerohive’s limited operating history,
particularly as a public company, uses of Aerohive’s capital and general
market, political, regulatory, economic and business conditions in the
United States and internationally.

Additional risks and uncertainties that could affect Aerohive’s
financial and operating results are included under the captions "Risk
Factors" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations," in the Company’s recent annual
report on Form 10-K and quarterly report on Form 10-Q. Aerohive’s SEC
filings are available on the Investor Relations section of the Company’s
website at http://ir.aerohive.com
and on the SEC's website at www.sec.gov.
All forward-looking statements in this press release are based on
information available to the Company as of the date hereof, and Aerohive
Networks disclaims any obligation to update the forward-looking
statements provided to reflect events that occur or circumstances that
exist after the date on which they were made, except as required by law.

Non-GAAP Financial Measures

Aerohive’s results for its third quarter of fiscal year 2018 reported in
this press release and the related earnings conference call include
certain non-GAAP financial measures, including:

non-GAAP gross profit and non-GAAP gross margin;

non-GAAP product gross profit and non-GAAP product gross margin;

non-GAAP subscription and support gross profit and non-GAAP
subscription and support gross margin;

The Company defines non-GAAP financial measures to exclude share-based
compensation, adjustments to internal-use software amortization, and
certain charges related to litigation and restructuring.

The Company has included certain non-GAAP financial measures in this
press release because the Company believes they are key measures which
can be used to evaluate the business, measure performance, identify
trends affecting the business, formulate financial projections and make
strategic decisions. In particular, the exclusion of certain expenses in
calculating these non-GAAP financial measures can provide a useful
measure for period-to-period comparisons of the Company’s core business.

Although investors frequently use non-GAAP financial measures in their
evaluations of companies, these non-GAAP financial measures have
limitations in that they do not reflect all of the amounts associated
with the Company’s results of operations, as determined in accordance
with GAAP. Some of these limitations are:

the non-GAAP measures do not consider the expense related to
stock-based compensation, which is an ongoing expense for the Company;

although amortization of internal-use software is a non-cash charge,
the assets being amortized often will have to be replaced in the
future, and the non-GAAP measures do not reflect any future cash
requirement for such replacements;

excluding certain expenses associated with litigation in the quarter
or fiscal year does not reflect the impact on our ongoing operations
over these periods of the cash requirement to defend such or other
litigation;

restructuring charges excluded in the quarter or fiscal year primarily
relate to employee termination costs and benefits and do not reflect
the cash requirement relating to the costs associated with such
restructuring; and

other companies, including companies in our industry, may not exclude
these as non-GAAP financial measures or may include them but calculate
them differently, which reduces their usefulness as a comparative
measure.

Because of these and other limitations, you should consider non-GAAP
financial measures only together with other financial performance
measures, including various cash flow metrics, net loss and other GAAP
results.

We have provided a description of these non-GAAP financial measures and
a reconciliation of the Company’s historical non-GAAP financial measures
to their most-directly comparable GAAP measures in the financial
statement tables included in this press release, and we encourage
investors to review the reconciliation.

A reconciliation of non-GAAP guidance measures to corresponding GAAP
guidance measures is not available on a forward-looking basis due to the
high variability and low visibility with respect to the charges that we
exclude from these non-GAAP measures.

Aerohive was founded in 2006 and is headquartered in Milpitas, CA. For
more information, please visit www.aerohive.com,
call us at 408-510-6100, follow us on Twitter @Aerohive,
subscribe to our blog,
or become a fan on our Facebook
page.

“Aerohive” is a registered trademark and “Aerohive Networks” is a
trademark of Aerohive Networks, Inc. All product and company names used
herein are trademarks or registered trademarks of their respective
owners. All rights reserved.

AEROHIVE NETWORKS, INC.

Condensed Consolidated Statements of Operations

(unaudited, in thousands, except share and per share amounts)

Three Months Ended September 30,

Nine Months Ended September 30,

2018

2017

2018

2017

Revenue:

(As Adjusted*)

(As Adjusted*)

Product

$

28,817

$

29,162

$

83,151

$

88,234

Subscription and support

11,735

10,139

33,643

29,597

Total revenue

40,552

39,301

116,794

117,831

Cost of revenue (1):

Product

10,595

9,880

29,645

29,165

Subscription and support

3,344

3,244

10,131

9,573

Total cost of revenue

13,939

13,124

39,776

38,738

Gross profit

26,613

26,177

77,018

79,093

Operating expenses:

Research and development (1)

8,529

9,260

26,389

28,032

Sales and marketing (1)

15,449

16,153

46,850

51,001

General and administrative (1)

5,243

5,700

16,469

17,486

Total operating expenses

29,221

31,113

89,708

96,519

Operating loss

(2,608

)

(4,936

)

(12,690

)

(17,426

)

Interest income

437

180

1,063

484

Interest expense

(196

)

(135

)

(543

)

(412

)

Other expense, net

(6

)

(90

)

(210

)

(268

)

Loss before income taxes

(2,373

)

(4,981

)

(12,380

)

(17,622

)

Provision for income taxes

60

75

202

369

Net loss

$

(2,433

)

$

(5,056

)

$

(12,582

)

$

(17,991

)

Net loss per share, basic and diluted

$

(0.04

)

$

(0.09

)

$

(0.23

)

$

(0.34

)

Weighted-average shares used in computing net loss per share, basic
and diluted

55,381,268

53,683,727

54,851,435

53,070,863

(1) Includes stock-based compensation as follows:

Cost of revenue

$

170

$

313

$

672

$

860

Research and development

1,094

1,329

3,108

3,082

Sales and marketing

1,152

1,566

3,259

4,361

General and administrative

1,415

1,756

4,047

4,658

Total stock-based compensation

$

3,831

$

4,964

$

11,086

$

12,961

* The Company has adjusted certain amounts for the retrospective
change in accounting policy for revenue recognition.

AEROHIVE NETWORKS, INC.

Condensed Consolidated Balance Sheets

(unaudited, in thousands, except share and per share amounts)

September 30,

December 31,

2018

2017

ASSETS

(As Adjusted*)

CURRENT ASSETS:

Cash and cash equivalents

$

32,473

$

27,249

Short-term investments

62,270

57,675

Accounts receivable, net

14,810

17,662

Inventories

13,690

13,495

Prepaid expenses and other current assets

6,430

6,396

Total current assets

129,673

122,477

Property and equipment, net

6,529

6,381

Goodwill

513

513

Other assets

5,244

4,900

Total assets

$

141,959

$

134,271

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:

Accounts payable

$

15,117

$

11,946

Accrued liabilities

8,568

8,602

Debt, current

20,000

—

Deferred revenue, current

38,183

33,279

Total current liabilities

81,868

53,827

Debt, non-current

—

20,000

Deferred revenue, non-current

37,642

33,761

Other liabilities

1,612

1,769

Total liabilities

121,122

109,357

Stockholders’ equity:

Preferred stock

—

—

Common stock

56

55

Additional paid–in capital

289,383

278,528

Treasury stock

(8,572

)

(6,216

)

Accumulated other comprehensive loss

(25

)

(30

)

Accumulated deficit

(260,005

)

(247,423

)

Total stockholders’ equity

20,837

24,914

Total liabilities and stockholders’ equity

$

141,959

$

134,271

* The Company has adjusted certain amounts for the retrospective
change in accounting policy for revenue recognition.